The Role of Impact Investing in the
By Virginie Issumo
The new style of philanthropy sits at the crossroads of entrepreneurship, finance and public interest. Its growing status in economic, social and financial activities becomes more and more evident. The size of some of today’s philanthropic contributions –sometimes higher than the budgets of whole countries – coupled with the increasing number of high-net-worth individual philanthropists in India, China, the Middle East and Latin America, demonstrates the efficiency of public interest initiatives from private donors or responsible investors. They act in partnership with public institutions or, in some cases, substitute for them in education, health, infrastructure and entrepreneurship programs as well as in humanitarian and environmental emergencies.
The potential for impact investment is huge because it represents commitments in terms of corporate social responsibility. Also, it answers demands from investors looking for true economic efficiency and human and material traceability. This appeals to the powerful philanthropists of today and has the potential to change the way they offer their wealth for the benefit of others.
ETHICS AND SUSTAINABILITY KEY FOR GIVERS
Wealthy families relate their governance and management criteria to ethics and sustainability. For this reason, bankers, advisors and industrial counterparts need to design offers that address these requirements based on concrete and understandable investments that comply with their values—this, of course, includes impact investing opportunities. If they don’t, they will simply be excluded from the market.
Concretely, a traditional financial center has a unique opportunity to sustainably attract wealth, whether from private or collective funds, both in investing in enterprises as well as projects profitable for the people, nature and thus for the business.
Corporate endowments, sovereign wealth funds, charitable foundations or trusts, as well as the individual savings of residents and non-residents, are collectively worth trillions of euros. The risk that banks and other financial service providers will see their clients refusing ethical investments and changing banks is slight. An ethical way of living, consuming and investing is therefore no longer just an option or a trend: It has become the sine qua non of the investment landscape.This means that in 20 years we could still be enjoying the same economic and energy comfort we have today.
"An ethical way of living, consuming and investing is therefore no longer just an option or a trend: It has become the sine qua non of the investment landscape."
CLIMATE CHANGE GALVANIZES THE SECTOR
The global reaction to the issue of climate change poses on example of the trend toward a new attitude toward finance and impact. Though it may have once seemed academic, something discussed by experts at unsuccessful summits, climate change is now something an investor, a corporation or an entrepreneur may consider as a main element of his marketing strategy.
Climate change is no longer merely a parameter for creating derivatives or increasing insurance premiums.It is now an impetus to produce more with less energy and to reduce as much as possible one’s carbon footprint. Benefits from a clean and respectful approach to production outweigh the expenses generated by reputational risk and natural disasters, which are set to increase, according to recent research by the IPCC.
A responsible producer of iron, clothes or tomatoes now needs to take many things into account in his or her production of services and goods: The use of renewable energy, the human and material costs and the cost of each component—especially of precious resources such as water. A cup of coffee requires about 120 liters of water, the cost of which should be supported by the final consumer and not local farmer in Burundi or Ecuador alone. Countries with strong philanthropic traditions that offer the right tools to organize, maintain, develop and transmit wealth, could take the lead in proactive philanthropy. We all need to focus on new ways of investing, living and producing, to create jobs, protect our environment and create a more complete sense of global well-being.
About Virginie Issumo:
Virginie is a trained lawyer with over 22 years experience in law, finance and philanthropy. Her focus is the impact economy and its role in the sustainable development of Africa, particularly its potential to support entrepreneurship by women and female leadership. Virginie is a member of organizations including the Polar Foundation, Expertisa, Women Role in Philanthropy, Coup de Pouce and Green Mango. She has developed programs in ecology, organic agriculture, literacy and management in the Republic of Congo. She has worked in collaboration with organizations including the University of Luxembourg, Rockefeller Philanthropy Advisors and the International University of Monaco.
[Image credit: Courtesy of Virginie Issumo]
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